European Semester Autumn package - comments and Q&A

24 November 2021

Comments by Commissioners Dombrovskis, Gentiloni and Schmid

Dombrovskis:

The economy is bouncing back from the recession, driven by a rebound in demand across Europe.

We expect the EU's economy to grow at 5% for this year. 

But we are not out of the woods yet. The economic outlook remains riddled with uncertainty.

New risks are emerging, many of them on the downside. The evolution and spread of the virus itself, to start with.

As we know, cases are on the rise in many parts of Europe.

Surging consumer and housing prices are other concerns, as are bottlenecks in vital supply chains.

As we emerge from this crisis, the priority is to achieve competitive sustainability:

- to make Europe economically and socially stronger;

- more resilient to cope with future shocks;

- better equipped to make the most of opportunities offered by the green and digital transitions.

This is all reflected in our Annual Sustainable Growth Survey.

These aims are also very much linked with the Recovery and Resilience Facility: to give EU economies the boost they need and to start rebuilding for the future....

Gentiloni:

Today's Annual Sustainable Growth Survey sets out a comprehensive macroeconomic vision and strategy for transitioning to a new growth model, a vision fully in line with the UN's Sustainable Development Goals and giving much greater prominence to the social and environmental dimensions.

You could call it a 'Beyond GDP' agenda.

The euro area recommendation very much reflects these messages:

• The euro area should maintain a moderately supportive fiscal stance in 2022, taking into account also the funding provided by the RRF. Moderately supportive doesn't mean tightening: it means targeting.
• Governments should gradually pivot fiscal measures towards investments and pay attention to the quality of those measures.
• They should keep fiscal policy agile in order to react if pandemic risks re-emerge, for example.
• Policies should be differentiated across the euro area to take into account the state of the recovery and fiscal sustainability.
• Governments should support job transitions and tackle skills shortages.
• And support packages for companies should focusing on the solvency of viable firms that have come under stress during the pandemic.

Ensuring the resilience of the EU economy means addressing both pre-crisis imbalances and emerging risks. While we were seeing a gradual correction of imbalances before the pandemic, the subsequent economic shock has exacerbated pre-existing issues:

• Public and private debts have increased both as a result of the shock and the essential measures we have collectively taken to counter that shock.
• After a period of downward adjustment – which contributed to the reduction of global imbalances – the euro area current account surplus is forecast to return to the pre-pandemic level of 3% of GDP this year and widen to 3.2% next year. This shows that there is room to sustain the recovery at the euro area level. 
• And finally, house price growth has increased further, which raises concerns, particularly where household debt is high or rising fast.

I will conclude with a few words on the fiscal part of this package.

The aggregate budget deficit in the euro area should decline markedly from 7.1% of GDP this year to 3.9% in 2022 and 2.4% in 2023. At the same time, public debt is projected to peak at 100% in the euro area in 2021 and to decline quite slowly to 97% by 2023....

Vice President Dombrovskis - in full

Commisoner Gentiloni - in full
Commissioner Schmid

Q&A

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